On January 10, 2014, new mortgage rules adopted by the Consumer
Financial Protection Bureau ["CFPB”], and required by the Dodd-Frank
Act, will go into effect. In anticipation of this upcoming deadline,
CFPB Director Richard Cordray has issued a letter to credit unions with
some pertinent information regarding "qualified mortgages.”

In
short, the new rules apply to all consumer-purpose, closed-end loans
secured by a dwelling, including home-purchase loans, refinances and
home equity loans - - whether first-lien or subordinate-lien loans.

First, you must assess and document a borrower’s ability to repay.

Second, you must determine if the loan you are making is a qualified mortgage. A qualified mortgage, or "QM,” would have: (1) points and fees less than or equal to 3% of the loan amount, with exceptions; (2) no high-risk features, such as negative amortization or interest-only; and (3) the loan term must not exceed 30 years.